Environment Editor, The Sydney Morning Herald

If there is a future to clean coal, it may well be found in Banana Shire in central Queensland.

There, amid open-cut coalmines and the odd Queensland bottle tree, federal and state governments and the coal industry over the weekend unveiled the Callide Oxyfuel Demonstration Project.

Who will know what will be a breakthrough in the next decade?

Dubbed a ''vitally important step towards low-emission coal technology'', the 30-megawatt power plant was handed another $27 million to reach 10,000 hours of operations to prove the processes work.

By November 2014, funding for the formerly mothballed 43-year-old plant will exceed $230 million. Governments, federal and state, will supply almost 40 per cent, with about a third coming from a voluntary levy on the coal industry, and the balance from Japanese companies and Tokyo.

The plant in recent days began trapping about 85 per cent of the carbon dioxide produced from burning coal using a mix of oxygen and flue gases.

Its proponents say that by proving the ''capture'' component of carbon capture and storage (CCS), the Callide plant may serve as a model to retrofit coal and gas-fired power plants around the world.

As typically the ''dirtiest'' fossil fuel source because of the high greenhouse gas it emits when burnt, coal is a key target of environmental groups campaigning to combat climate change.

Coal is king

The trouble for Australians seeking alternative fuels is that much of the economy rides in the back of a coal wagon. It produces about three-quarters of the nation's electricity while coal exports generated almost $46 billion in the 2010-11 year.

Last month's energy white paper pointed to rising dependence on the fuel at home.

Some $17 billion is earmarked for new mines, with another $40 billion under consideration, while $10 billion is committed to related rail and port infrastructure with the potential of another $38 billion being spent.

Abroad, coal is the fastest growing non-renewable energy use, with proposals to build 1.4 million megawatts of coal-fired generating capacity, not far shy of the world’s current stock of 1.6 million MW, according to the International Energy Agency.

Costly capture

Capturing and storing emissions, though, are quite different problems, and both are costly.

The Oxyfuel technique used at Callide and rival technologies of gasification (extracting C02 before the fuel is combusted) or post-combustion capture (using solvents to “scrub” out the C02 after firing) all require energy, effectively require more coal to be burnt for the same electricity exported to the grid.

In Callide’s case, that reduction is in the order of 30 per cent, a level that should be reduced over time.

A Japanese research organisation is currently seeking a 200-250 megawatt plant in Australia to develop the technology further, he said.

“Technically, it could be commercial within five years,” Dr Spero said, adding that he is confident a “normal” power plant of as much as 1000 MW capacity could be using the oxyfuel technology within a decade.

Storage

Once trapped, the carbon has to be stored and therein lie more challenges for the industry.

All up, the cost of generating power with CCS may be between $100-$150 per megawatt-hour, compared with wholesale prices of about $50 now, Dr Spero said.

A test site for storing carbon dioxide underground in Victoria’s Otway Basin has managed less than 100,000 tonnes over two years. By contrast, the stationary energy sector produces about 287 million tonnes of C02 a year, or about half of Australia’s annual emissions.

As a rough guide, burning one tonne of black coal burnt results in the emission of about two tonnes of carbon dioxide, while the ratio rises to three tonnes of CO2 for brown coal.

Xstrata, one of the companies backing the Callide project, is seeking support to test storage in central Queensland’s Surat Basin, near the Kogan Creek power plant. The government, though, said funding for that project is not imminent.

The Energy White Paper said Australia had the potential to store 417 gigatonnes of carbon dioxide, or the equivalent of 2000 years of current Australian emissions. It predicted that between 26-32 per cent of fossil fuel electricity generation capacity would have CCS applied to it by 2050.

“There’s technology to save it, it’s fairly advanced, its efficiency is rising and costs are coming down – it’s called renewable energy,” he said. “We shouldn’t socialise the cost of (the coal industry’s) lobbying.”

He said the coal industry should fund CCS on their own, given their "massive profits". "If they knew it would work, they'd be moving like anything."

Mr Wright said international projections of coal demand were likely to be exaggerated, noting that the construction of new coal-fired plants in the US had ceased, while China and India were curbing their future needs too. "We're hitting a peak in new coal plants," he said.

Energy minister Martin Ferguson, though, said it is not the government’s role to pick winners, and efforts to cut emissions from burning coal had to be part of a global effort.

“We are going to test every technology and see what comes through at best available commercial cost,” he said.

Oxyfuel may have an early edge over rival post-combustion and gasification capture technologies.

"The expensive part is the oxygen plant but it’s proven technology," said Dr Spero, the plant's project director.

The prospect for reduced risk is backed by David Harris, CSIRO's head of low-emissions electricity research.

“The attraction is that the technology is familiar and you can retrofit existing capacity," Dr Harris said.

A downside for Oxyfuel, though, is that boilers tend to leak - in rather than out - with the air ingress reducing the concentration of CO2 and adding impurities to the gases pumped to the CO2 capture plant. Those impurities have to be stripped out, Dr Harris said.

The presence of impurities can affect the transportation and storage of C02. Trace elements of sulphur- and nitrogen oxides would react with water forming weak acids that could corrode gas pipelines, although that outcome is "extremely unlikely" in the case of the Callide plant because of strict process controls, Dr Spero said.

The two oxides and carbon dioxide may combine with water when sequestered underground although those reactions with rocks, particularly if they create salts, may enhance the storage outcomes, he said.

The federal government's efforts to create a framework for commercialising CCS - and presumably, a plan to win over communities in regions where CO2 is to be injected underground - will crystallise next June with the release of the "CCS Roadmap for Australia to 2030".

Callide, an ageing plant that had been mothballed for years at a time, will likely be a focus of that framework.

“Ten years ago, it would have been inconceivable to do a project like this in Australia," Dr Spero said. "Now we look back and think, 'wow, that wasn't all that hard.'"